UK salaries decrease in global oil and gas survey

Salaries in the international oil and gas sector are facing a downward pressure after years of growth and despite an ongoing skills shortage in countries such as the United Kingdom.

A survey by recruitment consultants Hays and Oil and Gas Job Search that canvassed 24,000 respondents found that 83 per cent of oil industry employers did expect an upturn in salaries and benefits packages in 2014, even though compensation in the industry had flattened over 2013. However, such salary rises can be expected for highly experienced niche professionals.

British Skills Shortages

Such skills shortages are particularly acute in the British market, where university entrants have opted for softer humanities and business studies courses rather than the engineering, geology and other sciences that are the basis for a professional career in the oil and gas sector. Over recent decades, British universities have closed many geology departments as a result, while universities in North and South America and Asian and African universities have been expanding their intake into such departments.

Career competition in the oil and gas industry has always been on a global level, although up to a couple of decades ago, graduates from prosperous universities in Western Europe and North America had an in-built advantage. This advantage no longer exists as Asian universities in particular produce world-class graduates suitable for oil industry careers

Companies investing in the UK sector of the North Sea are able to hire professionals from abroad to fill the skills gap as immigration restrictions on such hiring are relaxed.

More Uncertainty

Jobs in the U.K. North Sea sector face uncertainty on three fronts:

Current tax incentives
Current tax incentives are insufficient to halt the decline of North Sea production despite the £14.4 billion invested in 2013. The upcoming referendum on Scottish independence is also creating uncertainty about future North Sea production taxation levels.

Global scale
On a global level, large-scale oil and gas reserves that make a significant difference to a major oil company’s balance sheet are ever more difficult to find. They are either located in very deep waters and command huge development costs or are controlled by state-owned oil companies that have to comply with strict regulations on employing domestic professionals and service companies. Consequently, overseas opportunities are not as great as they used to be for British oil professionals, with the exception of the topmost experts.

In addition, project development costs are huge. According to oil executives speaking in February at a London conference, the average development cost of an upstream project outside the US is US $1.5 billion. For a mid stream project the cost is US $2.5billion, while for a downstream project it is upwards of US $5 billion. So the cost of project financing will exert a downward pressure on salaries.

Shale gas production
Shale gas production in the United States has cut domestic gas prices by one third. While this has been good news to consumers, large corporations such as Shell and BHP Billiton have been pulling out of the shale gas sector as operations are no longer economic.

Under US regulations, larger corporations cannot claim some of the generous tax allowances available to small independent oil companies. Losses from shale gas operations have impacted company balance sheets and are affecting their ability to finance new projects and to hire new personnel.